By Sandy K. Johnson

In 2000, state pension plans were pretty much 100 percent funded. Now there is a $1.4 trillion gap in state pension funding nationwide.

What happened? The Great Recession, volatile investment returns, contribution shortfalls – and lots of poor decision making by stakeholders.

Some states are doing just fine, while other pension systems are under water  – notably Colorado, Connecticut, Illinois, Kentucky, and New Jersey, all less than 50 percent funded, according to a data analysis by the Pew Charitable Trusts. Only four states have at least 90 percent of the assets needed to pay promised benefits: New York, South Dakota, Tennessee and Wisconsin.

Greg Mennis, director of Pew’s public sector retirement systems, plays a long game. He is concerned about what happens when the next recession hits, piling more woe upon state and local systems that are already wobbly.

“After nine years of stock market growth, public pensions are just as vulnerable as ever,” Mennis told National Press Foundation fellows. “Unfunded liabilities are as high as they’ve ever been. Exposure to market vulnerability is as high as it’s ever been. … The right question is, do policymakers have the right tools to plan for the next recession?”

Pew has created a stress test to apply to pension systems, similar to the stress tests the Federal Reserve now applies to banks to ensure they can survive an economic crisis. The test weighs actuarial projections, market assumptions, asset allocation assumptions and state revenue forecasts.

It is not just an academic exercise. Pew says 10 states have used the stress test to assess the health of their systems.

All pension watchers are keeping an eye on a legal challenge to a California rule making its way through the courts. California law says pensions are a contract with an employee, formed the first day of employment, that cannot be changed to the detriment of the employee. Twelve states have some form of this rule.

As if the pension headaches weren’t enough, states also have a $1 trillion unfunded liability on health care benefits for retirees.